Media outlets have recently published news that, based on a freshly batched World Bank report, China’s economy will be the world’s largest in terms of purchasing parity power (PPP) by the end of 2014. Yet, China itself did not welcome the news. The World Bank included a note in its report that China’s National Bureau of Statistics had contested the methodology and rebuffed the report. Financial Times even reported how China had actively tried to convince World Bank analysts not to use the data. “China wanted to throw this out,” a source told FT. “They begged and threatened for a whole year … China hates it.”
It seems bizarre that China would want to quell a report highlighting its economic success story. Yet, there are good reasons for its reluctance to endorse the World Bank report. China’s National Bureau of Statistics reservations over the PPP methodology are both understandable and reasonable. Rather than market exchange rates, the PPP measurement takes into consideration the purchasing power of a country’s currency, which is a hypothetical calculation that assumes one price level across all countries. And as costs are much higher in the industrialized world, especially for non-traded goods, so the comparisons of GDP by PPP exchange rates tends to boost the relative size of poorer nations’ economies. In addition, PPP calculations are a statistical construction, based on complex surveys of baskets of goods in many countries, with a margin of error of 15 percent when using its data to compare economies of different sizes.
In a similar tune, Jeffrey Frankel from Harvard University writes that the ICP – or International Comparison Program – numbers assesses the real size of the world economies by comparing countries’ GDPs using PPP rates, rather than actual exchange rates. He suggests that this “is the right thing to do if you are looking at real income per capita in order to measure people’s living standards,” but adds that “I would argue that it is the wrong thing to do if you are looking at national income in order to measure the country’s weight in the global economy.”
Yet, behind China’s reluctance to take the “number one” position are strategic motives as well. The country’s unwillingness to sit at the big powers’ table reveal concerns over the risk that untimely international obligations could clog its economic development, and relenting or even wind-upping its ambition to top the global hierarchical scale. As Charles Kupchan admits, the still-lingering financial crisis and the West’s economic and political troubles have also produced a diminishing appetite for international engagement in the US and Europe. This explains, as Kupchan suggests, the urgency of gradual shifting of a greater burden on the shoulders of new emerging powers, and especially on China, when it comes to tasks such as conflict resolution and peacekeeping, humanitarian assistance, and reducing emissions. “Teamwork requires a consensus on new rules on the road and an appropriate allocation of the burden of responsibilities – including by moving economic agenda from the G8 to the G20, altering voting weights in the World Bank and IMF, and expanding the UN Security Council. A more important conversation entails the reallocation of responsibilities – identifying in what issue areas and in what ways emerging powers will contribute more to the provision of collective goods”.
True, the Western democracies are somewhat ready to accommodate new emerging powers, and even to forge a new and more pluralistic rules-based order, and for the current international liberal order to survive, both Western democracies and emerging powers will have to compromise. Though, as Kupchan unequivocally admits, the “West should ensure that it remains the West […] Especially if a more pluralistic and diverse international order looms on the horizon, the Western democracies must remain an unshakable anchor of liberal values and interests.” Why should then China – which has largely been skeptical and often with ill-disposed eyes of its uphill trend and of its political system – play the role a “responsible stakeholder” in an international liberal order shaped and anchored to the Western democracies?
As Kerry Brown remarks, as China’s demise has been predicted many times over the last two decades, more often than not through wishful thinking, it is not surprising that it now feels some right in refusing to shoulder obligations of an international order in which establishment it did not played a part. This view was shared by a commentary by Xinhua News Agency that argues that “this country [China] has come a long way, but it remains – undeniably – a developing country with too many fish to fry. Some challenges confront China enough, threatening its development sustainability and compelling the country to think less about growth.” At this time around, China’s response to a Western invitation to be seated at the table with responsible stakeholders could very likely sound as follows: “No, thanks, I am fine just as a guest.”

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About Alberto

Alberto Forchielli, born in 1955, received an MBA with honors from Harvard Business School and a bachelor’s cum laude in Economics from the University of Bologna. He is a founding partner of Mandarin Capital Partners, and the founder and president of Osservatorio Asia, a non-profit research center focused on Asia. He is also the founder of T-Island, a consultancy agency specialized in international relocations for professionals. In addition, he guided the expansion of the Roland Berger Foundation to Italy, which provides individual support for talented students lacking means to further their educations.